The hub of any strong Enterprise Risk Management (ERM) system is the organization’s risk climate or culture: the attitude and approach the organization takes toward identifying, monitoring, controlling, and mitigating risk.

Truly understanding the risk climate requires more than just completing checklists.  It is at the very heart of how the executive management and the board approach risk. It’s often not black or white.  How are decisions made in the organization? Are opposing concerns minimized? Are executives encouraged to discuss concerns? How does the board or executive management discuss the things that keep them awake at night? How strong is the “bad-news network”? How is the quality of management and human resource practices incorporated into the ERM? 

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The Best Bankers

 

When I was a young OCC examiner, eons ago, traveling around Minnesota, North and South Dakota, and Wisconsin, I saw all types of banks—well run, mediocre, sloppy, self-serving—there were all types.

 

I always learned the most from those banks that year after year had respectable, but not flashy, results. They almost always had strong systems, good morale, and great risk management practices.

 

 

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I know it’s a bit of a stretch but try thinking about the FDIC as a client—maybe your most difficult client. Here are some adjectives that might fit:

 

• demanding
• critical
• impatient
• ungrateful

 

Then, imagine that they are one of your most important clients and that you can’t fire them.

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